Think back to all of the doomsday articles predicting the death of retail outlets. I have some surprising news that may change your perspective on these often-maligned shopping centers and strip malls. The truth is that well-located, well-tenanted retail is not just surviving; it is thriving. The numbers reveal an incredible truth: retail occupancy has been climbing steadily since the COVID-19 pandemic era. The occupancy rate is expected to reach 95.7% nationally in 2025, marking an all-time high.

So what’s going on here? There are two key reasons, or perhaps just one: it's a classic case of Supply and demand, folks.

The demand for retail space remains, and more importantly, almost nobody is building new properties. The types of retail properties that are faring the best are not your big-box enclosed malls. They are open-air shopping centers that you pass on your way to somewhere else, particularly if a grocery store anchors them.

Let’s entertain a scenario. You need a haircut. But can you do this online? Some centers focus on what people actually need, but which cannot be provided online (or at least not yet)—groceries, pharmacies, dry cleaners, nail salons, coffee shops.

Amazon cannot replace these kinds of businesses. Their convenient locations, as well as the consistently needed services they offer, have led to a strong surge in rent in the entire commercial real estate market. As a result, the property owners are steadily experiencing an increase in income year after year.

Rental income is increasing, and the strip centers are the most significant providers. The consistency in the net operating income growth expressly indicates how conveniently the strip centers are located and how focused they are on the essential goods and services.

The winning formula of the best-run properties is pretty simple. First, fill your center with businesses that can add value. Select your tenants by prioritizing their foot traffic and their competitiveness against online shopping. Essential retailers and restaurants offering quick meals are prime examples of ideal tenants.

Now this is where things get really interesting for investors. Despite all these strong fundamentals, retail REITs are trading at a significant discount compared to other funds. The market perception has yet to catch up with reality.

Looking at historical returns, Retail REITs may appear to be underperforming, but they are actually outperforming the broader REIT benchmark and surpassing sectors like office and industrial, which investors previously favored.

Additionally, the rolling returns may paint a different picture. Retail REITs have demonstrated themselves to be a strong investment option for long-term investors, as they have outperformed most property sectors, except for healthcare REITs, in 2025. The FTSE Nareit Equity Retail Index has climbed sharply since early 2025, closing the performance gap with industrial and residential REITs, while office and data center segments continue to lag.

Let's put this in perspective: retail REITs are trading at just 14.62 times their expected funds from operations, while the broader S&P 500 is valued at 22.54 times earnings. Even compared to the finance sector at 16.71 times, retail REITs are sitting at a deep discount. This valuation gap is noteworthy when considering the strong fundamentals we just discussed—high occupancy, rising rents, and consistent income growth. The market is essentially offering you the opportunity to purchase quality assets at a discounted rate.

The Retail REIT bounce is not temporary. It is a self-indulging cycle.

Limited new construction is not entirely bad. It adds value to the property, driving strong demand for prime locations that maintain high occupancy rates. When occupancy rates increase, landlords will hold more pricing power, leading to higher rent rates. Rising rents, in turn, complete the cycle by elevating property income and values.

Each part of this cycle feeds into the next, sustaining an eternal momentum.

Overall, ‘evolution’ is the more suitable term, rather than using ‘deceased’ to describe the physical retail. Properties focusing on irreplaceable necessities succeed in the market. The disconnect between firm performance and current valuations signals a golden opportunity for investors.

Next time you pull into your neighborhood shopping center for a quick errand, take a closer look. What you see might be one of the strongest performers in commercial real estate right now.

Mark Spitznagel, who made $1B in a single day during the 2015 flash crash, warns markets are mimicking 1929. Yeah, just another oracle spouting gloom and doom, right?

Vanguard and Goldman Sachs forecast just 5% and 3% annual S&P returns respectively for the next decade (2024-2034).

Bonds? Not much better.

Enough warning signals—what’s something investors can actually do to diversify this week?

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